2008-12-31

My better GMAC bailout

The Treasury will purchase a $5 billion stake in GMAC and lend $1 billion to GM so the automaker can contribute to the lender’s reorganization as a bank holding company, according to a statement issued yesterday. The loan is in addition to $13.4 billion the Treasury agreed earlier this month to lend to GM and Chrysler LLC.

The fresh capital will enable GMAC to expand lending to car buyers and help save GM.

GMAC LLC, bolstered by a $6 billion federal bailout, resumed lending to General Motors Corp. customers with lower credit scores as the U.S. stepped up efforts to keep the automaker in business.

[...]

Reviving GM’s sales has become a priority for U.S. policy makers including the Federal Reserve because of concern that the automaker and its suppliers might go bankrupt and deepen the year-old recession by firing millions of workers. The funds for GMAC are on top of $13.4 billion the Treasury agreed earlier this month to lend to GM and Chrysler LLC.

The new capital will allow GMAC to lend to insolvent people and hence create some sort of subprime for auto-loans (Mish believes the same).

The intended goal is to help US citizens to get more into debt in order to help save GM. This is just rephrasing the last quoted sentence of the first article ("The fresh capital will enable GMAC to expand lending to car buyers and help save GM.").

BUT, $6 billion is still a HUGE amount of dollars, even in these new era of quantitative easing where the word trillion has replaced billion in all the amounts quoted (this just precludes how enormous the inflation cataclysme will be a few months down the road).

Suppose that a basic GM car costs $20,000. With only $6 billion (= $6,000,000,000) , you can still buy 300,000 cars.

My suggestion — whic is totally silly, by the way, but probably less dumb and useless than what the Paulson and Bernanke are doing here — about how those $6 billion could have been taken from one pocket of the US citizens and returned to another, instead of just stolen from the public by GM with the help of this corrupt US Government is:

Why not just spend that $6 billion to buy 300,000 cars from GM and organize some sort of state lottery to allow the US citizen to win a free car? At least this would have been fun and cheerful, and would have made 300,000 US families happy. And it's Christmas!

But that wouldn't have been useful to the US government, which wants to keep the sheeps in the flock. People in debt are slaves to their creditors. The more people you keep in debt, and the deeper in debt they are, the more those in power (governments and banks) can extend this power... And the more they are scared/worried, the more they will beg the government to take more power in order to protect them. Do you see a pattern since the past 10 years?

I found these two quotes a few days ago while reading The Age of Inflation, Continued by Hans F. Sennholz, and I think they are two great ones:

"The state is no organism capable of bringing either moral or material improvements to the populace, but merely a vehicle of power for the men and party in power." [Sennholz attributes this one to Machiavelli but I couldn't get any confirmation from Google, so I doubt he is right]

"We are ever aware that politics is an ugly struggle that determines ‘who gets what, when, and how.’ It is the favorite occupation of people who serve special interests, who have axes to grind, and public careers to advance. It is a game in which benefits are bestowed according to political skill and connection, rather than merit. It is an arena of pressures and counter-pressures in which emotion often prevails over reason, and power over justice. Conflict politics has nothing to do with morals and ethics; it is a bitter battle about position, benefits, privileges, taxes, and obligations."